Universal Life Insurance. Yay or Nay? - Page 3
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Thread: Universal Life Insurance. Yay or Nay?

  1. #21
    Senior Member pwm's Avatar
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    Yes to both a) and b). No debt, no liabilities. Both our funeral arrangements are taken care of and already paid for. Investment income and pensions would be more than enough to keep my wife going for as long as she could live.

    No need for life insurance any more. I had it when I needed it, but not required now.


  2. #22
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    Quote Originally Posted by kcowan View Post
    It is the difference between $125 and $42.35 and grossed up to cover all 3 policies. That is what you are paying beyond the insurance portion every month.
    Thanks for the clarification. So it is the sum of all i pay for the investment part. That sure is a lot...

  3. #23
    Senior Member carverman's Avatar
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    Quote Originally Posted by jmbagsy View Post
    You're pretty much right. It's like im paying a management fee to which I can pretty much do myself. Better pay myself for doing it.
    Yup..as they say, pay yourself first.

    Yes, there is a surrender charge so probably we will get very little of what we have put in it for all years we had the policy. Still a better deal than continuing with them right?
    IF it were me, I would get out of it asap, and go with term insurance. Make sure you get a term insurance policy before you cancel the other and
    read the fine print thoroughly.
    Not only is the premiums cheaper for your age, but you can put some of the "surplus"payment into your child's RESP..the government puts in a percentage of what you put in each year...much better investment for life than life insurance on a 2 yr old child.
    Are you paranoid that something will happen to your child before he/she reaches maturity?

    Regarding this, I always make sure I tell them everything about my medical condition. Also, my agent told me that if i have a life insurance coverage that totals or more than the house i am planning to buy. I wouldnt be needing to buy a mortgage insurance. How's that work?
    Simple..your life insurance (assuming term here) will cover your mortagage indirectly. If you take out $200k or $300k of term life insurance, you don't need mortgage insurance.
    As far as developing a life threatening medical condition..that can come at any stage of your life, so not having any life threatening
    medical condition at the time when you first buy the policy doesn't necessarily mean that 10-20 yrs later, some serious medical condition happens.

    Even if you don't volunteer disclosure of this condition, the life insurance company can and most likely will check with your doctor on what treatments
    you had over the years and possibly deny payment, requiring a lawsuit if your family (not you) wants to collect on the policy.

    They are in the business to make a profit, not to pay out hundreds of thousands on policy holders that succumb prematurely due to some
    unforseen health condition.....except of course accidently,nobody can predict an accident that can take your life.

    In the event that something catastrophic happens to you, your wife will collect the face value of the insurance and pay all, or at least most of the mortgage off.
    Last edited by carverman; 2017-03-19 at 03:03 PM.

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  5. #24
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    Quote Originally Posted by jmbagsy View Post
    Any idea how I would tell her that I want to cancel the policy?
    As I said upthread, if you feel you need life insurance protection and would like term insurance you should obtain that coverage BEFORE you cancel your current plan, just to make sure you are not left without some protection.

    As for the cancelation. You can send a letter directly to the insurance company's head office. Just state the policy number and date it and tell them you want to cancel it immediately and of course sign it and it is done. Make sure they have your current address in case their is some cash value that would come back to you. No need to talk to your agent. If you call them they may try to redirect you to the agent, but just tell them you don't want to go through them. They do that as a courtesy to the agent but are not married to using them. You are not the first customer who doesn't want to deal with their agent anymore.

    Just so you know. Your agent will not suffer any chargebacks if the policy is 4 years old (chargebacks are usually only within the first 24months) and the renewal commissions, which are not much anyways are about to disappear on that policy anyways. So your agent has pretty much received all the remuneration they were going to and I doubt they would care less whether you keep it or not. The insurance company is in the same boat. Universal life policies are sold in the hopes that a customer keeps it for a while and then decides to get rid of it, hopefully before they die. The insurance company will probably keep almost all of the cash value via surrender charges and they get off the hook of paying out the inevitable death benefit. Sure they would have preferred you to keep paying for 20 years more and then go away, but they definitely want you to go away. Don't take offense. It is part of their business model.

    Let's just say life insurance is a weird business. The companies are almost as happy to see a customer go away as they were to acquire them in the first place. Go away alive of course. That is critical to their profits...and it is their untold story. Anyway, with some of the crap they sell, it tends to work out perfectly for them.
    Last edited by OptsyEagle; 2017-03-19 at 04:00 PM.

  6. #25
    Senior Member carverman's Avatar
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    Quote Originally Posted by OptsyEagle View Post
    A
    As for the cancelation. You can send a letter directly to the insurance company's head office. Just state the policy number and date it and tell them you want to cancel it immediately and of course sign it and it is done. Make sure they have your current address in case their is some cash value that would come back to you. No need to talk to your agent. If you call them they may try to redirect you to the agent, but just tell them you don't want to go through them. They do that as a courtesy to the agent but are not married to using them. You are not the first customer who doesn't want to deal with their agent anymore.
    Yup,that's what I did with my pre-arranged (expensive) funeral arrangement. After 9 years of having a policy with Foresters Insurance (that the funeral home put my one time payment in trust), I decided to cancel it and go for much cheaper funeral arrangements.

    The way I see it, if your in the ground, you are in the ground, it doesn't matter how fancy others see your final arrangements, so might as well save the money, and use it to pay off bills etc.
    I did contact the funeral home to have the release papers signed, the rest the insurance company sent me a check for the full amount. I just had to followup with couple of phone calls as to why they were so slow in sending me my refund.

    Sure they would have preferred you to keep paying for 20 years more and then go away, but they definitely want you to go away. Don't take offense. It is part of their business model.
    Yes it seems to be part of their business model, because the premiums you pay over say 20 years (240 paymnents) may only cover most (but not all of their final payment to your family),so they have to pay out the shortfall on what you paid vs what they have to pay out of their equity.

    The longer you pay,the more they get from you to invest, but at the same time they take a big risk if you take out a $300k policy then happen to die within the first 5 years of the policy being in effect.That's why they have life expectancy tables (male/female/smoker/nonsmoker) and the premiums depend on your age and health situation at the time you take out the policy.
    Last edited by carverman; 2017-03-20 at 09:13 AM.

  7. #26
    Senior Member carverman's Avatar
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    [QUOTE=carverman;1513258] duplicate post
    Last edited by carverman; 2017-03-20 at 09:16 AM.

  8. #27
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    Quote Originally Posted by OptsyEagle View Post
    Yes and No. Yes, get rid of that junk and buy term insurance to protect your family. No, definitely do not call that same agent to buy your term insurance. That agent works for herself. You want one that works for you. Not always easy to know in advance but I think you already know where your last agent stands on that measure.
    To be honest, you'd be surprised how little these agent's know about the products they sell. A family friend got me into this deal when i was 18. As I got a few years older, and realized what a bad deal UL was, I explained that I wanted to cancel. When I showed him the math about how much I was paying in fee's he was shocked, because the fact is, they are never explained what lousy things they are selling. They are just taught the benefits, and how to sell it based on those.

  9. #28
    Senior Member carverman's Avatar
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    Quote Originally Posted by CalgaryPotato View Post
    To be honest, you'd be surprised how little these agent's know about the products they sell. A family friend got me into this deal when i was 18. As I got a few years older, and realized what a bad deal UL was, I explained that I wanted to cancel. When I showed him the math about how much I was paying in fee's he was shocked, because the fact is, they are never explained what lousy things they are selling. They are just taught the benefits, and how to sell it based on those.
    They are trained to sell and get a commission from the insurance company for every policy they sell.

    I find that hard to believe that he "didn't know" as they go through a training plan with the insurance company to understand what they are selling and the commissions they will get when they are sucessful.

    Now, I don't know about the bank employees selling the the insurance policy receiving some commission, but this was the way many years ago when my ex decided to answer a Canada Life ad. The guy came to our house and discussed what she would be selling, and told her that before they would hire hire her, she had to make TWO firm sales from their products they offered. Ie:go door to door.

  10. #29
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    Quote Originally Posted by carverman View Post
    They are trained to sell and get a commission from the insurance company for every policy they sell.

    I find that hard to believe that he "didn't know" as they go through a training plan with the insurance company to understand what they are selling and the commissions they will get when they are sucessful.

    Now, I don't know about the bank employees selling the the insurance policy receiving some commission, but this was the way many years ago when my ex decided to answer a Canada Life ad. The guy came to our house and discussed what she would be selling, and told her that before they would hire hire her, she had to make TWO firm sales from their products they offered. Ie:go door to door.
    They know how to sell the product, and they know what they get as far as commissions go. What they are not taught, unless they do their own math to learn it (and many don't) is what the actual fee's that go to the customer are. The problem with those funds, is the investment is a fund, with a hefty % fee. The insurance piece doesn't have a fee, but is valued in a way that makes the company money, and then they tack on that extra $12/month or whatever account fee. As a bonus kick in the teeth fee.

    That is the real problem with these products. They should in theory be similar to getting a bank mutual fund, and an insurance policy. And even with the hefty MER, it might be worth it, since there are some tax advantages with these products. But then they tack on the extra fee on top, which depending on how much money you are putting in over top of your insurance cost every month, can be like paying a well over double digits MER.

  11. #30
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    Quote Originally Posted by CalgaryPotato View Post
    To be honest, you'd be surprised how little these agent's know about the products they sell. A family friend got me into this deal when i was 18. As I got a few years older, and realized what a bad deal UL was, I explained that I wanted to cancel. When I showed him the math about how much I was paying in fee's he was shocked, because the fact is, they are never explained what lousy things they are selling. They are just taught the benefits, and how to sell it based on those.
    Absolutely. To be clear, Universal Life is an incredible product. The problem isn't the product, the problem are the agents trying to sell it to everyone and unfortuneately it is wrong for the majority of our population. When it is right, it is fabulous and unmatched by any traditional investment products or other insurance products, because of its unique tax advantages, flexibility and hidden benefits that can only be provided by insurance. Unfortuneately in the quest for more sales, even the insurance companies sales reps will promote it to the agents for needs that either are ridiculous or can be dealt with better with other investment products. An uneducated agent will easily fall prey to these sales tactics, especially when their inherent bias to making a sale, is present.

    In the quest to understand my advice a little better. The issue about the insurance company wanting their customers to go away, after some period of premium paying time, is also a benefit to the right customer. This issue is known in the industry as a "lapse subsidy". When the insurance companies are quoting insurance they look at all the regular stuff like mortality, their internal expenses, commissions paid, interest rates, etc., but they also look at their experience with lapses (people cancelling their policies). Remember the insurance company is socking away money to pay the eventual claim of the death benefit, since death is not a maybe but is a certainty. That money they are putting aside comes from the premiums the customers pays. This is all separate from any cash value that really comes from the customer paying premiums above their insurance costs. So, this reserve fund the insurance company is developing is real money and very valuable. What do you think happens with the reserve when the customer cancels their policy? It does not form part of the cash value of a universal life policy, so the customer does not get it. The insurance companies would love to keep it all for themselves but because we live in a very competitive insurance market, what actually happens is they take their estimates of how much money they will generate from people cancelling policies and use it to reduce the premiums offered to new customers. As I said, they call this the "lapse subsidy".

    So, if you have a real need for life insurance and you actually keep it till you die, you can see that you are actually benefiting from other people who are lapsing their policies. It is not a small benefit but a huge benefit and all tax free to your heirs or estate. Add all this to a corporate owned policy, for example, that is using pre-tax corporate dollars (money not paid out to the owners yet) that pays the entire death benefit tax free outside the corporation to the heirs via their capital dividend account, and I will guarantee you that no other investment will ever generate the same estate value to the heirs, then Universal Life, Level cost life insurance. Certainly not with the same guarantees.

    That is just one of many examples where it can be used very effectively in the right circumstances. The original posters circumstance, unfortuneately, was not one of them.

    Last edited by OptsyEagle; 2017-03-20 at 10:44 AM.

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